Monday Market Update – November 29

Forefront’s Monday Market Update

Your portfolio doesn’t matter, your plan does

Portfolio management is now free. The likes of Vanguard, Schwab, BlackRock, and Robo-advisors have gone the final mile and the race to the bottom is over. Individual investors can go online to any of these varying company’s websites, and find completely free model portfolios. Does a free portfolio matter without a plan?

Worst behavior at the worst time

Study after study is done to show how humans react to different scenarios and changes in the fluctuation of the economy and stock market. So, what is that data telling us?

The data is pretty clear in suggesting that humans are at their absolute worst behavior, at the absolute worst time. This is a vicious cycle, and a huge part of what makes markets function to begin with. People, must lose, and the large majority of people must lose huge at the most crucial pivot points for the markets and economy. The performance of even the absolutely best managed funds proves this. Every. Single. Year.

What does it matter if the portfolio is free if even the professionals have a tough time acting professionally in times of market turmoil?

Cost doesn’t matter without a plan

Whether a portfolio is free or costs 1%, it does not matter in the grand scheme of your life if you haven’t a clue if you can’t control your emotions in the face of a 24-hour news cycle, data points coming at you from all directions, regulatory changes, talking heads on TV giving their opinions designed to outrage, or volatility. If you don’t have a clear path on how to act, implement, and react to varying conditions than whatever you pay, even if it is $0 is too much.


I write about this today, because Thanksgiving dinner always brings about the same questions to me. This year was a particularly inflation, and crypto currency heavy with questions ranging on every topic in between as well. The one that always makes me chuckle is when someone is obsessing over the cost of hiring a financial planner, or a particular mutual fund. Portfolios are free after all, so why pay anything.

If you aren’t talking about a true plan, the conversation about cost is completely meaningless. You might have the best (not cheapest) mutual fund or advisor in the world, but if you don’t know how to control your own cognitive deficiencies, the cost of whatever it is, doesn’t matter. Failure is inevitable.

What the heck is this “plan” I keep talking about

Your portfolio is just a tool inside of your plan, that is carefully curated to bring about an acceptable outcome for your plan over time. The plan requires some assumption to be made, careful calculations, and tries to use statistical facts as a beacon to follow. The planning process creates scenario after scenario of possible outcomes and then calculates the possibility of those outcomes using statistical fact. Finally, the plan is created to work and guide you through all of the most likely outcomes that we have identified.

This requires one thing from you though. It requires you to have deliberate behavior that is rational. Making poor decisions, even if the cost is $0 doesn’t help anyone, so fixating on cost or performance that is being compared to anything but YOUR plan is putting the cart before the horse.

So What?

So how does this impact all of you?

  • A portfolio is not a plan
  • Rational and unemotional behavior is the key to success

Stock market calendar this week:

10:00 AM Pending home sales
9:00 AM S&P Case-Shiller home price index (year-over-year change)
9:45 AM Chicago PMI
10:00 AM Consumer confidence index
DEC. 1
8:15 AM ADP employment report
9:45 AM Markit manufacturing PMI (final)
10:00 AM ISM manufacturing index
10:00 AM Construction spending
2:00 PM Beige Book
8:30 AM Initial jobless claims (regular state program)
8:30 AM Continuing jobless claims (regular state program)
8:30 AM Nonfarm payrolls
8:30 AM Unemployment rate
8:30 AM Average hourly earnings
9:45 AM Markit services PMI (final)
10:00 AM ISM services index
10:00 AM Factory orders
10:00 AM Core capital goods orders (revision)

Most anticipated earnings for this week:

The McNamara Fallacy makes us all focus on what is easily measurable and quantifiable. One of the things we fail to ask our advisors, attorneys and accountants is “What is your decision making process.” We address exactly what our decision making process at Forefront Wealth Planning is in the latest episode of Understanding the Power of Money.
Listen to episode 15 of Understanding the Power of Money.